US Stocks Fall On Worries China Could Need More Tightening

DonnaKardos

NEW YORK (MarketWatch) -- U.S. stocks fell Thursday on concerns that strong growth in China would lead to more tightening measures, although better-than-expected jobs data in the U.S. helped limit the decline.

The Dow Jones Industrial Average declined 35 points, or 0.3%, to 11791. Bank of America was the measure's worst performer with a 1.9% drop. Commodities-related companies were also weak, with Alcoa down 1.6%, Chevron off 0.8%, and Exxon Mobil down 0.6%.

The materials and energy sectors led the drop on concerns about the impact to demand for commodities if China has to undergo more tightening after data from China showed its economy unexpectedly accelerated in the fourth quarter of 2010. Crude-oil futures dropped below $90 a barrel while gold futures also fell.

While China's strong performance reflects improving demand for Chinese goods in the U.S. and elsewhere, it also adds to expectations that Beijing will feel the need to yank the reins back harder to fight inflation. That has worried global investors, who fear that Beijing might overcorrect and sap the strength of an economy that has accounted for a huge share of global growth in recent years.

However, the declines in U.S. stocks were limited by data showing the number of U.S. workers filing new claims for unemployment benefits fell by more than expected last week, pointing to slow improvement in the U.S. jobs market.

Initial jobless claims fell by 37,000 to 404,000 in the week ended Jan. 15, the Labor Department said Thursday in its weekly report. The previous week's figures were revised to 441,000 from 445,000. Economists had expected last week's claims to drop by 25,000 to 420,000.

The dollar rose. The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, gained 0.3%. Treasurys fell slightly, lifting the yield on the 10-year note up to 3.38%.

The euro flickered between small gains and losses as investors digested a Wall Street Journal report that Spain plans to pour billions more euros into its troubled savings banks and force them to be more open about their lending practices, according to people familiar with the matter. The hope is that a series of capital injections will quell investor jitters about the savings banks, known as cajas.

The fate of the cajas is inextricably tied to the fate of Spain and potentially to the euro itself. Fear that the savings banks can't raise funds on their own and will need a government bailout was one reason ratings agency Moody's put Spain's rating on review for a downgrade last month.

Wendy's/Arby's Group added 5.8% after the restaurant company confirmed it is exploring strategic alternatives for its Arby's sandwich chain, including a possible sale of the business. The strategic review was earlier reported by the Wall Street Journal, which cited people familiar with the situation. It comes as Arby's has lagged behind Wendy's performance, with steeper same-store sales declines.

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